That Was Quick

After yesterday's advance and this morning's strong open, stocks quickly resumed their recent downtrend as the S&P 500 made a new low for the month and is now down 6.3% from its closing high on 7/19.  The next level of support for the S&P 500 is its 200-day moving average which stands at 1,449.28.  Since the index first rose above its 200-day moving average in early '03, this level has only come into play five other times.

General Motors & The Wisdomless Crowd

This morning GM reported Q2 earnings per share (EPS) which exceeded consensus forecasts by a wide margin ($2.29 vs. $1.10).  A look at individual analyst EPS forecasts shows that in addition to the overall 'crowd' consensus, none of the forecasts were even close.

Historical Consumer Confidence Chart

With consumer confidence hitting a six-year high today at 112.6, we thought we'd take a look back at the historical confidence numbers to see where we stand in the grand scheme of things.  The average monthly consumer confidence number since 1967 is 98.19.  Its highest reading came in January and May of 2000 at 144.7.  Its lowest reading came in December 1974 at 43.2.

Commodities Check: Oil Overbought, Natural Gas Oversold

Below we highlight the price and trading areas of nine major commodities.  The green shading represents two standard deviations above and below the commodity's 50-day moving average.  When the price approaches or trades outside of this area, it is considered overbought or oversold.  Currently, oil is the only commodity trading at overbought levels.  Metals and coffee are trading within their trading areas, and orange juice and corn are attempting to stabilize after recent declines.

   

   

Recommended Asset Allocation; Timely Downgrade

Below is a historical composite of the recommended equity weightings from Wall Street strategists (via Bloomberg).  Currently, strategists recommend 63.5% allocated to stocks, 25.1% allocated to bonds, and 10.1% allocated to cash (the other 1.3% varies).  Looking at the historical equity allocation, even as stocks have risen in recent years, strategists have been loathe to increase their equity allocation to early 2000 levels.  As shown by the chart below, they increased their equity allocation in the late 90s as markets charged higher and continued to decrease equity exposure during the first half of this bull market.  Over the last three years, however, they have remained steadfast between 60% and 65% and seem to not be succumbing to momentum as much.

Strategists also made a nice call recently by decreasing equity exposure at the start of June from the 66% level down to 62.5%, and following last week's declines, they bumped it back up from 62.5% to 63.8%.

Below we also provide strategists' historical recommended bond and cash weightings.

Yesterday's Key ETF Performance

From our daily ETF Trends report, our list of key ETFs showed gains across the board in equities yesterday, while oil (USO) and fixed income ETFs declined.  Brazil (EWZ), China (FXI), Germany (EWG) and Mexico (EWW) had the biggest gains out of country ETFs, and emerging markets ETFs (EEM, EEB) were up over 3%.

S&P/Case-Shiller® Home Price Indices

At the start of June, we posted the historical year-over-year % change in S&P/Case-Shiller Home Prices for the 20 cities tracked.  The April 2008 S&P/Case-Shiller Home Prices were just released this morning, so we have updated our charts accordingly.  The year-over-year and month-over-month changes for each city as well as the two composite indices are listed below.  While many cities have seen declines in home prices versus a year ago, there are still a few cities which have shown growth, although at a smaller pace than in the past.  On a monthly basis, there were eight cities, including Boston and San Francisco, that saw increases in home prices from March to April. 

   

We also updated the chart below which shows the difference between the most recent S&P/Case-Shiller Home Price report and the May 2008 housing futures offered by CME, which trade off of the S&P/Case-Shiller Indices.  As shown, from now through May 2008, investors are still looking for declines across the board.

The charts below show the historical monthly year-over-year percent change in home prices of the 20 selected cities and composite indices that S&P/Case-Shiller tracks.

   

 

Looking For Some Action? Most Volatile Stocks

For traders with a more short term time horizon, we have compiled a list of the S&P 1500 stocks which have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low for the last fifty days).  We then grouped the stocks based on whether they have a rising or falling 50-day moving average.  Stocks highlighted in gray are new to the list this week.

Bespoke's Sector Snapshot

Below we highlight the trading areas of the ten S&P 500 sectors.  The blue shading represents one standard deviation above and below the sector's 50-day moving average.  Prices are considered neutral when trading within these boundaries.  The red area represents one and two standard deviations above the sector's 50-day, and outside the red area is 2+ standard deviations above.  When the price moves into red territory, it is considered overbought, and anywhere above the red area marks an extreme reading.  A move above the red area is usually followed by a short-term pullback or sideways trading pattern.  The green area is between one and two standard deviations below the sector's 50-day, and outside the green area is 2+ standard deviations below.  A move into green territory is considered oversold and extremes are seen once the price moves below the green area.  As shown by the charts below, many sectors remain at or below extreme oversold levels.

   

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Second Quarter Earnings Forecasts

Judging by the performance of the stock market lately, one would think that earnings reports have been a big disappointment.  However, as the chart below shows, analysts have had to raise their EPS projections for the quarter by a wide margin.  As of June 30th, analysts were expecting year over year second quarter earnings growth of 4.6%.  Now, following reports from two thirds of the constituents in the S&P 500, analysts have boosted that growth rate up to 7.5% - an increase of 63%.

Prediction Markets Site Still Likes a 5.25% Fed Funds Rate by Year End

While we've been reading about an 80% implied chance (based on futures) of a Federal Funds rate cut (currently we're at 5.25%) by year-end, prediction market traders on Intrade are only factoring in a 20% chance.  The last trade for the Federal Funds rate to be on or over 5.25% by the end of 2007 was 80.5 on Intrade.  Contracts on the site expire at 0 or 100, so someone buying the contract would receive $19.5 by making an $80.5 bet that the rate will be on or over 5.25% by year end.  Right now there are 5 contracts bid at 72 on the site for the on or over 5.25% level.  Arbitrage opportunity?

Second Quarter Earnings Calendar: Updated 7/30

We have just updated earnings report dates on Think B.I.G.'s Earnings Calendar.  The calendar now highlights expected report dates through 8/13 and gives detailed information on past reports so you're prepared when companies report this quarter.  For a more in-depth, interactive version of the Earnings Calendar to search for specific stocks, sign up at www.BespokePremium.com.

Bespoke on CNBC's Street Signs Today at 2 PM ET

Paul Hickey will be appearing today on CNBC's Street Signs with Erin Burnett to discuss the markets and second quarter earnings season.

Second Quarter Earnings Heatmap

We've already reached peak report day this season, and our earnings heatmaps below have filled up considerably.  The first heatmap below highlights companies in the S&P 500 that have beaten, missed or reported inline earnings per share this quarter.  The area of each sector represents its weight in the S&P 500, while the shading represents the weight of the individual components and how their results fared versus expectations. Green shading represents a beat, red shading indicates a miss, and blue means the company’s results were inline with forecasts.  As shown, most of the board remains green, with 65% of companies beating estimates.  The one sector showing a surprising amount of red is Energy, as some big-name companies (XOM) failed to meet expectations even as oil prices have risen.

The next heatmap highlights how each stock has performed on the first trading day following their earnings report.  Green shading means the stock went up on the day and red shading means the stock went down.  Investors continue to focus on things other than earnings, and as a result, stocks have not fared well throughout this season.  This definitely provides opportunities to find stocks that have reported strong results but gotten hit hard due to overall market declines.

 

What's Your View on the Market?

Bullish sentiment remained at 58% last week according to Bespoke Market Poll participants.  After last week's declines, we'll be interested to see how all sentiment measures, including our poll, react to all that red on the tape.  Please take a moment to let us know your current view on the S&P 500 by voting in our poll below.  The time frame of the question is intentionally nonspecific so investors of all types (short term, long term, etc.) can participate.

My current view on the S&P 500 is:
	Bullish
	Bearish
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